Equity cure provisions, a common feature of leveraged facilities agreements, allow an injection of capital into the group to stave off or 'cure' a financial covenant default. When lenders agree to include such provisions they generally take comfort from the fact that, in exercising them, sponsors will inject further equity or subordinated debt into the group, providing both additional funds and a show of commitment.
The recent decision in Strategic Value Master Fund v Ideal Standard International Acquisition SARL and others gives lenders cause to take extra care when including such provisions in facilities agreements.
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